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BSP processing applications from 29 cryptocurrency exchange firms

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By Melissa Luz T. Lopez
Senior Reporter

THE CENTRAL BANK is evaluating more applications from virtual currency (VC) exchanges looking to operate in the Philippines, at a time of increasing demand for bitcoin and similar digital money.

Bangko Sentral ng Pilipinas (BSP) Deputy Governor Chuchi G. Fonacier said the regulator is processing applications from 29 cryptocurrency exchange firms as of March 15.

“There are 29 pending applications under different stages of processing, i.e., ongoing evaluation, awaiting submission of documentary requirements, and for presentation of business model,” Ms. Fonacier said via e-mail when asked for updates.

Currently, two virtual currency exchanges are registered with the BSP: Rebittance, Inc. and Betur, Inc. more popularly known as Coins.ph.

In February 2017, the BSP stepped up to regulate firms which convert cash into virtual currencies like bitcoin and ethereum, imposing some requirements for risk management and to combat money laundering activities.

Under the law, the BSP is the sole authority that can issue money in the Philippines through bank notes and coins used as legal tender for day-to-day transactions.

However, these digital currencies may be used for paying goods sold through the Internet, which sometimes stands as an investment for its holders given its fluctuating valuations. It is a form of digital money that is not issued or guaranteed by a central bank, and can be sent or received by anonymous users internationally.

Any person can buy and sell bitcoins, which may be traded by tapping the services of bitcoin dealers or brokers who look for good deals for a bitcoin investor; going to bitcoin exchanges — an establishment that allows bitcoin holders to directly buy and sell the virtual currency; participate in a “mining pool” — a group of individuals with top-of-the-line computers that can solve complex math problems to unlock codes in exchange for a bitcoin; or look for someone to trade cash or goods for bitcoins.

The BSP has been cognizant of the benefits drawn from using electronic currencies, but warned against risks of rapidly-changing values, potential use for crimes, and cybersecurity concerns.

Bitcoin values have fluctuated from around $1,000 in January 2017 to a peak of nearly $20,000 apiece in December. It is currently trading at the $6,000 level, according to its website.

“In the Philippines, VCs are not considered as deposits. In case VC exchanges fold up or stop operating, VC holders cannot claim deposit insurance from the Philippine Deposit Insurance Corporation,” the central bank said in a set of frequently asked questions on digital currencies published over the weekend.

“The public is advised not to blindly follow the crowd, adopt herd mentality, or engage in speculative transactions. The public should exercise extreme caution at all times when dealing with VC products and transactions in general.”

The rapid and anonymous nature of VC transfers also make it difficult to reverse such transactions, as there is also no state entity that can guarantee these digital currencies, the BSP added.

The regulator issued its first public warning on the use of digital currencies in March 2014, when foreign regulators banned banks and brokers from handling the new currency following the collapse of Mr. Gox, a Tokyo-based bitcoin exchange.

The BSP is also in talks with the Securities and Exchange Commission for “cooperative oversight” on initial coin offerings, especially for those with investment features.

Bitcoin transfers are likewise attractive due to cheaper remittance fees, with the country being the third-biggest receive market in the world.